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Judge Backs Health Insurer Molina in $52M ACA Suit, but It's Not the End

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Although a federal judge ruled last week that Molina Healthcare Inc. is owed more than $52 million under an Affordable Care Act program meant to promote insurer participation in the ACA public exchange system, the California-based insurer may not see the money anytime soon.

(Related: Judge Certifies ACA Risk Corridors Class Action Notice)

With one claim still pending, the case is among more than two dozen winding their way through the U.S. Court of Federal Claims, as the health care industry faces increasing uncertainty: Just two days before Judge Thomas Wheeler issued the ruling in Washington, last week, Molina announced that it will pull out of the exchange programs in Utah and Wisconsin by the end of the year. The company reported losses of $230 million for the second quarter.

Wheeler on Aug. 4 granted partial summary judgment in favor of Molina, ruling that the federal courts have the authority to get the cash for the risk corridor program payments from the federal Judgment Fund. The fund makes an indefinite, unlimited appropriation available to pay court judgments entered against the United States.

The Wheeler decision is the second win for insurers that has emerged from in a wave of litigation related to the risk corridors program.

Drafters of the ACA established the program in an effort to ease health insurers’ fear of providing coverage for previously uninsured Americans.

The idea was to use money from insurers that did well on the exchanges in 2014, 2015 and 2016 to help insurers that did poorly. Near the end of 2014, however, a Republican Congress, led by Sen. Marco Rubio, R-Fla., put a risk corridors payment limit in an enormous 2015 federal spending bill. The provision prohibited the U.S. Department of Health and Human Services from using any source of cash other than cash from thriving exchange plan issuers to make payments to the issuers that were doing poorly.

The program has taken in only enough cash from issuers that did well in 2014 and 2015 to pay about 16% of the amounts owed to struggling insurers for 2014. The program has not paid anything to insurers that performed poorly in 2015.

All told, the government is on the hook for about $8.3 billion in risk corridor payments to offset losses on the exchanges in 2014 and 2015. More than a dozen health insurance companies have sued over the failure of HHS to make the risk corridors program payments.

In his ruling, Wheeler denied the government’s motion to dismiss Molina’s claim for breach of an implied covenant of good faith and fair dealing. The ruling means that Molina can proceed with that claim.

“We have another step before the decision can be appealed by the government where we either proceed and litigate that claim, or take other action to recover for risk corridor amounts due for 2016,” Molina’s lead attorney, Reed Smith partner Lawrence Sher, said in an interview Tuesday. “Until that remaining claim is resolved, the government cannot appeal Friday’s ruling.”

— Read Humana to Write Off $591 Million in Aca Risk Corridor Money on ThinkAdvisor.


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